Clean Growth Strategy - EI Overview

An Overview of the BEIS Clean Growth Strategy, October 2017

The Clean Growth Strategy (the Strategy) covers the broad spectrum of the energy system, and describes ambitions in many areas that should move the UK energy system forwards. However, many of the ambitions are less definite when it comes to implementation, or actual (rather than potential) investment amounts. The 50 key proposals and policies in the Clean Growth Strategy (the Strategy) are divided into eight categories by policy objective. The first category addresses green finance, six focus on emission reductions in specific sectors of the economy including the public sector, and the last addresses government leadership. This document summarises each of these eight policy areas and provides evidence of Energy Institute (EI) member views based on the 2017 Energy Barometer and other consultation activities around energy policy.

Accelerating clean growth

The clean growth policies centre around public and private financing mechanisms through the establishment of a task force, voluntary standards for sustainable financial management, a small investment fund for early stage technologies, and green mortgage products.

The financing of new and clean energy infrastructure is of concern to EI members who viewed the investment climate as risky for most energy technologies due to policy uncertainty, especially immature low carbon technologies. The establishment of a Green Finance Taskforce is welcome, but its effectiveness will depend on the concrete proposals and measures this Taskforce sets out. The Government has been criticised for creating a gap in green financing by selling the Green Investment Bank; the new clean technology early stage investment fund of up to £20m seems minor in comparison to, for example, EDF’s $100m fund investing in clean energy start-ups.

Improving business and industry efficiency (25% of UK emissions) and improving homes (13% of emissions)

These measures consist mainly of energy efficiency improvements, which EI members agreed can enable the greatest emission reductions from heat through to 2030. Many efficiency measures, including improved insulation of new and existing buildings and upgrades to heating systems, are mentioned in the Strategy.

However, the policy proposals to implement these measures remain relatively vague at this stage and it is yet to be seen whether effective policy will be implemented. The Government will consult on efficiency standards of new and existing buildings (commercial and residential) following the outcome of independent review of Building Regulations and fire safety. It also wants to explore voluntary standards for commercial buildings. EI members identified financial incentives and mandatory standards as the most effective policy measures for reducing heating emissions; one example found in the Strategy is the proposed green mortgage products meant to incentivise property owners to invest in energy efficiency.

The stated goal to raise all fuel poor households to EPC (Energy Performance Certificate) band C by 2030 was mentioned in the Conservative Party manifesto. Compared to the Liberal Democrats’ goal to raise at least 4 million homes to band C by 2022 and all homes to band C by 2035, the target set out in the Strategy is less ambitious. Furthermore the measures set out in the Strategy include some policies that have been in place for years, such as the Renewable Heat Incentive, smart meters and the Energy Company Obligation. The latter however will be extended to 2028 (from 2022).

The goal to demonstrate world leadership in carbon capture usage and storage (CCUS) will be welcomed by many in the energy industry. But it remains to be seen if the announced £100m of public investment, compared to £1b funding competition that was scrapped in 2015, will increase confidence and investment in this sector. CCS was seen as the riskiest energy technology due to policy uncertainty by EI members in the Energy Barometer.

Along with the Strategy, the Government has also published joint decarbonisation and energy efficiency action plans for seven of the most energy intensive industrial sectors.

The Strategy announces £162m of research funds for commercial energy, process and resources efficiency and £184m of public funding for residential energy efficiency and low carbon heating technologies.

Accelerating the shift to low carbon transport (24% of emissions)

The Strategy emphasises the need to shift to low carbon transport, through technological, infrastructure, and behavioural changes. The technological changes consist of moving away from petrol and diesel cars and vans by 2040, and incentivising consumers and taxi drivers to take up ultra low emission vehicles (ULEVs). To enable effective use of electric vehicles, a widespread, increasingly ‘smart’ vehicle charging network (which enables demand shifting) will be deployed across the UK. Hydrogen refuelling infrastructure will also be increased, enabling increased use of hydrogen fuel cell vehicles.

Bus emissions will be reduced through retrofits and new lower-emission models, and emissions from freight will be reduced via shifting from road to rail. Local cycling and walking networks will be developed to help incentivise low carbon alternatives to driving for short journeys.

Innovation funding will also support transport developments, including advanced fuels, battery technology via the Faraday Challenge, trials of heavy goods vehicles (HGVs) platoons, zero emission HGVs, and the establishment of the Centre for Connected and Autonomous Vehicles.

Delivering clean, smart, flexible power (21% of emissions)

The Strategy reaffirms much of the progress underway in the electricity system. It confirms the phase-out of unabated coal by 2025, the support for offshore wind through a possible 2019 Contracts for Difference auction, research into turbine blade technology and foundations, and the Government’s commitment to carbon pricing. It also sets out the actions through which a Smart Systems and Flexibility Plan will be implemented, enabling new technologies to compete in the energy market and allowing consumers to access time-of-use tariffs. To further enable renewable integration and improve system flexibility, new electricity interconnectors will be encouraged.

The Strategy announces that Government will publish a draft bill requiring “Ofgem to impose a price cap on standard variable and default tariffs.” EI members have urged caution on a price cap; while affordability could be impacted positively for one segment of consumers, this may be counterbalanced by negative impacts on investment, decarbonisation and competition. When surveyed earlier this year, a majority of EI members felt that a price cap should not be introduced.

A range of innovation funding in smart systems, nuclear, renewables, CCUS and electricity networks is outlined in the Strategy. Nuclear will receive by far the largest share of these funds aimed at advancing technologies that will decarbonise the electricity system in an affordable way. To encourage decarbonisation through a market mechanism, the commitment to carbon pricing is reaffirmed, with details to be set out in the Autumn Budget 2017.

Wider environment and natural resources (15% of emissions)

The Strategy considers wider environmental impacts including non-energy emissions, specifically around reducing agricultural emissions and supporting increased UK forestry and restored peatland. It also includes support for reducing waste and making steps towards a circular UK economy.

Leading in the public sector (2% of emissions)

To set a positive example, the Government intends to agree on more ambitious 2020 emission targets for central government, and the introduction of a target of 30 percent emissions reduction by 2020-2021 that would apply to the wider public sector. Like the other targets described in the Strategy, this will be voluntary. £255m will be made available for energy efficiency improvements for public bodies.

Government leadership in driving clean growth

Additional initiatives promoting clean growth include a “Green Great Britain” week, the reinstatement of a Clean Growth Inter-Ministerial Group to monitor the implementation of the Strategy. Finally the Strategy introduces annual reporting on UK emissions intensity, as has been called for by the Energy Institute and partners through the ADE’s Energy Productivity and Less Waste More Growth campaigns. 

To view the Strategy in full, please follow the link below.